Effective July 1, 2026, the Internal Revenue Service (“IRS”) increased its standard mileage rate for business use of a personal vehicle to 76 cents per mile, up from 72.5 cents per mile. The new, higher mileage rate applies to eligible business miles driven on or after July 1, 2026. Miles driven before that date remain subject to the rate in effect at the time the miles were driven. Prior mileage rates are available on the IRS’s Standard Mileage Rates webpage.
For California employers, the increase is a timely reminder to confirm they are appropriately reimbursing employees who drive their personal vehicles for work.
Reimbursement Obligation Under Labor Code Section 2802
California Labor Code section 2802 requires an employer to indemnify employees for “all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties.” This obligation includes a duty to reimburse employees for the reasonable and necessary expenses associated with the employee’s use of their personal vehicle for work-related travel when the employer requires or permits that use.
In Gattuso v. Harte-Hanks Shoppers, Inc., 42 Cal.4th 554 (Cal. 2007), the California Supreme Court recognized three methods an employer may use to satisfy the obligation to reimburse employees for reasonable and necessary work-related vehicle expenses:
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